Many people have heard of the dangerous and risky reverse mortgage. They have been warned to never get one. Most of these people simply do not understand what a reverse mortgage is and how it works.
A Reverse Mortgage is very much like a traditional mortgage, except with a traditional mortgage the homeowner is making payments each month and paying down their mortgage. With a Reverse Mortgage the homeowner never makes a mortgage payment, they are essentially living off of the equity in the home.
With a reverse mortgage, the only thing the homeowner is required to pay is their homeowner’s insurance and their property taxes. The loan can and will go into default and the bank will foreclose on the homeowner if these two obligations are not met.
A reverse mortgage will allow the homeowner to do one or more of these options:
1. Eliminate a monthly mortgage payment
2. Get cash back in a lump sum
3. Get a monthly tenure for as long as they live in the home
A reverse mortgage is a very safe loan. Its a government FHA loan. The government has put many safeguards in place to protect the homeowner and most likely, their largest investment.
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